Weekly Review I June 14, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I June 14, 2023

RELEVANT NEWS

CANADIAN PACIFIC KANSAS CITY DE MEXICO: THE RAILROAD THAT CONNECTS NORTH AMERICA

Nearshoring offers the opportunity to strengthen the logistics network of industries that use freight rail as one of their main transports between the countries that make up the USMCA.

Canadian Pacific Kansas City (CPKC) is the first railroad that connects Canada, the United States, and Mexico in a direct line, with 32,186 km of track. It has connections to 12 of the most important ports in the three countries, as well as an intermodal service from Lazaro Cardenas to Chicago that takes only seven days from the time the first container is unloaded from the ship until it is interchanged.

In this context, Mexico has a geographic location very close to the target markets of hundreds of industries, especially in industrial regions such as the Bajio area and the north of the country, providing an opportunity to present freight rail as a reliable and efficient option in the logistics process to transport large volumes of goods to various markets from the country.

CPKC de Mexico is the safe and efficient option to transport more merchandise and attract investment through a rail service that connects the countries of the USMCA trade bloc, which makes it a strategic element that drives nearshoring.

Nearly 70% of Foreign Direct Investment (FDI) is in the states served by Mexico’s CPKC network. Of the 10 states with the highest FDI, six cross Mexico’s CPKC rail network.

CPKC offers more competitive and cost-effective transportation services, improves the supply chain, and reduces transit times. As recently as March 2023, CPKC announced new multi-year agreements with Schneider and Knight-Swift Transportation for intermodal transportation services along the single-line north-south corridor.

These services offer new solutions to streamline the logistics chain for newly relocated companies in Mexico.

SOURCE: FORBES MEXICO

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

JUNE 7-13, 2023

POLITICAL AGENDA

• Meeting with INE board members: The President indicated he intends to talk in order to work in coordination to seek the correct functioning of the elections and avoid electoral frauds. Likewise, he stated that the conditions exist for a new relationship with the electoral authorities, although some reforms are needed to consolidate it.

• Judicial Power: The President informed that there could be changes in the next Federal Expenditure Budget to remedy the excesses in the salaries of ministers and the trust with more than 20 billion pesos to maintain privileges.

• Reforms: President Lopez Obrador announced that before the end of his Government he will send a reform to make economic support for disability universal and support for senior citizens lowered to 65 years of age.

• New government in Coahuila: President Lopez Obrador stated that the majority of the people of Coahuila decided for Manolo Jimenez, to whom he has already sent a congratulatory message. He pointed out that, it is necessary to have good coordination and work together, since one thing is the party and another thing is the government. He reaffirmed that there will be a good relationship,

since there are important works in process such as the healthy water for the Laguna that would benefit Coahuila and Durango.

• Pensions: The President of the Republic explained that, as of the pension reform carried out in 1997, workers receive between 40 and 50% of their salary when they retire, for which reason they are analyzing sending a reform initiative and changing this “unfair” act.

• Right of Reply: Claudio X Gonzalez and Gomez Mont are lawyers in Xochitl Galvez’s amparo lawsuit to participate in the morning conferences. The President pointed out that this is a political strategy, since Xochitl Galvez is seeking the candidacy to the Chief of Government of Mexico City, therefore he will not agree to her presence in the conference.

• Mining Reform: In response to a question from a reporter regarding the Amparos that are being promoted against the Mining reform to protect concessions, President Lopez Obrador, mentioned that with the reform the concessions granted are not being put at risk, even though in many cases they are not used for the exploitation of minerals and in his case they are being used for financial speculation.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

his interest in running as a presidential candidate and, therefore, was not considered.

• New Secretary of Foreign Affairs: President Andres Manuel Lopez Obrador informed that Alicia Barcena Ibarra will replace Marcelo Ebrard as Secretary of Foreign Affairs, following his resignation to seek MORENA’s candidacy for the presidency. In this sense, the President pointed out that she will occupy the position in 10 days, since she is currently Mexico’s ambassador to Chile.

ELECTIONS 2024

• Electoral process: President Lopez Obrador highlighted the beginning of the 2024 electoral process and emphasized that in his party, MORENA, there are no longer impositions or direct appointments. He congratulated himself for the internal decision making and the absence of “dedazo” or pre-selected candidates. He acknowledged having met with the presidential hopefuls outside of his working hours and outside of the National Palace. He emphasized the need to guarantee equal conditions and unity. It was mentioned that the method of selection of candidates in MORENA is through surveys and transparency is guaranteed in the election of plurinominal candidates by means of a lottery. The President reiterated that he will not seek reelection and that he will retire at the end of his term, highlighting the importance of a generational replacement. In addition, it was clarified that Juan Ramon de la Fuente did not express

• Resignations of members of the Cabinet: The President argued that all priority projects have specific people in charge of their correct functioning, therefore, in the event of resignation of members of his Cabinet to seek candidacies for governorships in the 2024 election, the functioning of his government would not be affected.

ECONOMY

• Inflation: President Lopez Obrador highlighted that inflation is decreasing according to INEGI’s report. He attributed this improvement to the Package Against Inflation and Expense (PACIC), which has reduced the prices of basic products and avoided fuel increases. He highlighted the strengthening of the peso and the focus on achieving economic growth with welfare without generating inflation. He acknowledged that during the neoliberal period there was a loss of purchasing power, but the increase in the minimum wage has contributed to improve purchasing power. He presented a graph showing an increase in the purchasing power of basic products such as beans, eggs and tortillas. Although he pointed out that there are still pending challenges in the area of pensions.

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

INFRASTRUCTURE

• Six-Year Works: President Lopez Obrador said that over the weekend he made a supervision tour in the Huastecas. He also detailed that the possibility of extending the runway of the airport in the municipality of Tamuin, in San Luis Potosi, is being analyzed, and said that 10 billion pesos are being invested in the extension of the Valles - Tamazunchale highway. The President said that before leaving office he expects to finish all the six-year works and maintain the welfare programs that already exist.

• New state airline: President Lopez Obrador pointed out that former President Felipe Calderon handed Aeromexico over to businessmen, leaving Mexico without a public company. In response, it was decided to create a state-owned airline, possibly under the name “Aerolinea Maya”, with the intention of rescuing the “Mexicana de aviacion” brand. However, there were lawsuits from Mexicana de Aviacion workers that have delayed the decision on the brand. Despite this, it is expected that the state-owned company’s aircraft will begin operations this month.

• Category 1: Regarding the recovery of Category 1 aviation status, the President stated that Mexico has complied with the demands of the United States and only one step remains to be taken in that country. Good news is expected in the near future. The role of Foreign Minister Marcelo Ebrard in international relations was also acknowledged, especially in the negotiations related to the aviation category. Although differences with the United States persist, the infrastructure and security at the airports have been improved, highlighting the Felipe Angeles airport. The President highlight-

ed the agreement reached with cargo and courier companies to move their operations to the Felipe Angeles airport. However, he mentioned that there is an organization that refuses to comply with the transfer within the deadline established by the decree. The willingness to be flexible in this matter was expressed.

• Tren Maya: Diego Prieto Hernandez, Director General of INAH indicated that 100% of the permits have already been granted for the recovery of archaeological zones in Yucatan and Quintana Roo for the Tren Maya works, only section 6 remains, where archaeological field salvage must be substantiated. El Meco” an archaeological site in Quintana Roo was mentioned; through a video it was highlighted that an integral tourist zone will be promoted to take advantage of the attraction of sun and beach.

• Hydraulic Projects: President Lopez Obrador shared progress on two hydraulic projects: the recovery of Lake Texcoco and the construction of the “El Cuchillo II Aqueduct” in Nuevo Leon. Lake Texcoco was declared a Natural Protected Area to conserve fauna and wetlands. The “Texcoco Ecological Park” project is 65% complete and will bring benefits such as improved air quality and recreation. In the Monterrey Metropolitan Area, the con-

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

struction of La Libertad Dam is 64.8% complete, while the El Cuchillo II Aqueduct is 58% complete with a federal investment of 4,743 million pesos. These projects seek to improve the environment and water supply in the corresponding regions.

HEALTH

• IMSS-Bienestar: When asked about the refusal of some governors to implement IMSS-Bienestar in the states, the President pointed out that the enrollment of the states is voluntary. In this sense, he does not rule out that the governors have agreements with medicine distributors, which is why they refuse to implement the program in their states.

• Medicine shortages: the president mentioned the existence of corruption in the sale of goods and services to the government by 10 companies, some related to the government and the media. The issue of medicine shortages was addressed, stating that the IMSS-Bienestar program is operating in 15 states and has solved the problem to a great extent. The intention to improve the health system before the end of the government was highlighted and it was mentioned that the states without affiliation to IMSS-Bienestar have their own budget to purchase medicines. In addition, the supply of psychiatric drugs will be reported in a later bulletin.

• Health Protection: The President stated that he is complying with a series of commitments to protect the health of the population, among them, it was decided not to allow the commercialization of transgenic corn; and, on the other hand, a series of regulations have been implemented on products that are harmful to health, especially restrictive

measures have been promoted in the advertising of tobacco products such as cigars and vapes, and in alcoholic beverages, such as beer.

SECURITY

• Security Report: During the current six-year term in Mexico, the Secretary of Security and Citizen Protection, Rosa Icela Rodriguez, reported that there has been a 17% decrease in homicides at the federal level. However, 47.6% of these homicides are concentrated in six states: Guanajuato, State of Mexico, Baja California, Jalisco, Chihuahua and Michoacan. There has also been a 43.2% reduction in motor vehicle thefts. The prevention of oil theft has been a priority for the Armed Forces, which have achieved an estimated savings of more than 271 billion pesos. In relation to the prevention of tollbooth takeovers, an estimated savings of 50 billion 366 million pesos is estimated from 2020 to June 1, 2023. In addition, since March 2022,

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

1,520,000 foreign vehicles have been regularized, with most of these regularizations occurring in Tamaulipas, Chihuahua and Baja California.

• Insecurity: The president noted that Nuevo Laredo is the most problematic municipality in terms of security in Tamaulipas. A strategy is being implemented to address the increase in crimes related to the collection of “derecho de piso” by organized crime. In Guanajuato, crystal meth use has become one of the main problems of insecurity, affecting both young people and workers in the maquiladora industry. This has generated a drug distribution market and has contributed to the increase in homicides. The president emphasized the importance of preventing the increase in drug use and implementing information campaigns aimed at young people, addressing the underlying causes rather than resorting to coercive measures.

INTERNATIONAL

• Meeting with the U.S. Secretary of Transportation: The President informed that he will be meeting today with the U.S. official, he shared that they will discuss the recovery of Category 1 aviation. He added that at the meeting he will express his disagreement with authorities from another nation defining these criteria; however, the progress that has been made for Mexico to recover this category will be presented.

• Foreign Investment: The President commented that companies that set up in the country must comply with the standards and implement the same practices that regulate industries in their countries of origin. He added that a lot of foreign

investment is arriving, given that the country is seen to be stable, especially in economic terms, he celebrated the fact that inflation is being lowered, and the stability that the peso is registering.

NEWS BY STATE

BAJA CALIFORNIA

The governor of Baja California, participated in a session of the National Council of the Business Coordinating Council together with the governors of the States of the northern border of Mexico, where she presented the main economic advances and investment management in the entity. The governor mentioned that Baja California is at its best moment to receive investments, for which reason her administration is deploying a strategy for growth in this matter, where the resources benefit everyone and not a minority, in addition to create better-paid jobs.

SONORA

The Sonora Sustainable Energy Plan was presented in Europe to continue positioning Sonora as a reference worldwide in clean energy and a promoter of the industries of the future. In addition, four of the photovoltaic plants located in the State have been fully built and are undergoing tests.

SOURCE: JORNADA NEWS, GOVERNMENT OF SONORA

NUEVO LEON

The president of the National Chamber of Commerce, Services and Tourism of Monterrey (Canaco Monterrey), Fernando Canales Stelzer, mentioned that given the dynamism of commerce, services, and industry due to nearshoring, the demand for employment will increase and at the same time there is a growing population of migrants who are looking for job opportunities, so it is necessary to find solutions and public policies to face challenges in terms of security, health, housing, and work.

CHIHUAHUA

The State of Chihuahua is positioned among the top ten most competitive states in Mexico in the State Competitiveness Index (ICE 2023).

According to data provided by the Mexican Institute for Competitiveness A.C. (IMCO), Chihuahua managed to climb four positions in the state competitiveness indexes.

The surveys have shown that Chihuahua was positioned as the second state with the greatest progress compared to the previous edition: from 12th place, it is now in 8th place.

SOURCE: EL ECONOMISTA, SDP NOTICIAS

TAMAULIPAS

From October 2022 to date, the government of Tamaulipas has 45 FDI projects confirmed, which total around 400 million dollars and will generate 7,200 new jobs. The investment is mainly concentrated in Nuevo Laredo, Reynosa and Matamoros and also in Altamira and Ciudad Victoria.

This is due to the investment promotion efforts in which they participate: Expo Manufactura, Hannover Messe Festival, and future events, in which government, academia and companies participate, where they highlight the advantages of the state, such as its 18 international bridges that cross with the United States.

COAHUILA

Coahuila has become an attractive and safe place for foreign and domestic investment, thanks to the skilled labor force, political, labor and economic stability, the rule of law, its geographic location and, above all, the security experienced in its five regions.

During 2023, 39 investment projects have been carried out, totaling 2,100.65 million dollars, generating 24,437 formal jobs.

SOURCE: EL ECONOMISTA, CLUSTER INDUSTRIAL

GUANAJUATO

The industrial activity economy in Guanajuato registered an annual growth of 7.5% during February 2023, compared to the same period of time of the previous year, as reflected by the Industrial Activity Indicator by State (IMAIEF), published by the National Institute of Statistics and Geography (INEGI).

In addition to this growth, the manufacturing industry of the entity, with a 10.5% increase, ranked fourth at the national level with the highest growth in this subsector.

SAN LUIS POTOSI

San Luis Potosi consolidates a new pole of economic and social development in the Middle Region, with the injection of historic resources that the state government is applying for roads and boulevards, modern lighting, the new natural linear park, industrial promotion, tourism and social programs, after 30 years of neglect, said the state governor, Ricardo Gallardo Cardona, after announcing an investment in this 2023, of 7 billion pesos for infrastructure works in the four regions.

SOURCE: EL UNIVERSAL, LIDER EMPRESARIAL

QUERETARO

The period from January to May 2023 has been dynamic for the state’s export manufacturing sector, where companies in the industry have recorded annual growth of between 5 and 6%, according to Enrique Quezada Ojeda, president of the Queretaro Export Industry Association (Index).

Such progress goes hand in hand with the forecasts that the sector had for this

part of the year and that they expect to continue for the rest of 2023; it is an average growth, among the variations reported by each industry, including automotive, aerospace, agribusiness, among others.

SOURCE: EL ECONOMISTA

CDMX

Due to the fact that some of the country’s main cities are seeking to increase their competitiveness in order to attract investment, Mexico City and Ciudad Juarez, Chihuahua, signed a coordination agreement. In this regard, the municipal president of Ciudad Juarez, Chihuahua, Cruz Perez Cuellar, explained that the objective is for the country’s capital to support them in the exchange of public policies, especially those focused on the development of government platforms in the areas of digitalization, security, mobility, education, and technology; factors that are necessary for the current economic context, such as nearshoring.

STATE OF MEXICO

The State of Mexico ranks second nationally in terms of the number of intentional homicides, after Guanajuato, with a total of 1,119 cases registered from January to May of this year. As part of the federal government’s monthly security report, it was obtained that there are six Mexican states that concentrate the highest number of cases of this crime with 47.65%; in addition to Guanajuato and the State of Mexico, there are Baja California, Jalisco, Chihuahua and Michoacan.

SOURCE: EL ECONOMISTA, EL FINANCIERO

INVESTMENT NEWS

NORTHEAST

DAYOU AUTOPARTS

South Korean company Dayou Auto Parts has started production in Santa Catarina, Nuevo Leon, creating 300 new jobs in the region. With an investment of $20 million, the company will manufacture 1.2 million steering wheels annually.

NORTHWEST BRENTWOOD

Brentwood Industries, Inc., a global leader in plastics and advanced polymer solutions, will expand its production capacity at its plant in Tijuana, Baja California. The company expects the facility to be operatio-

nal by August 2024. This expansion reinforces their commitment to meet customer demand and provide high-quality products, improved delivery times, and enhanced supply chain responsiveness.

BECTON DICKINSON

American multinational medical technology company Becton Dickinson (BD) has announced a new investment in Ciudad Juarez, estimated at between $70 and $80 million. This new plant will optimize the product processing network and ensure efficient delivery to distribution centers in the United States and Europe. Construction of the new plant is set to begin in August of this year and is expected to be completed by September 2024.

INVESTMENT NEWS

CENTRAL MEXICO

YAZAKI

Yazaki Corporation, a Japanese automotive component manufacturer, will create 875 jobs and invest $30 million in its Guanajuato plant. The company specializes in wire harnesses, meters, and electronic components for the automotive industry, and has a global presence in 45 countries, including operations in Leon and Silao, Mexico.

FURUKAWA

Furukawa Automotive Systems Mexico, a Japanese company, will invest $5.2 million to expand its facilities in Valle de Santiago, creating over 700 jobs. The company specializes in manufacturing automotive systems and electronic equipment and currently employs over 250 people at its Sendai Industrial Park location.

DENSO

Denso, a Japanese company specializing in the manufacturing of cooling systems, air conditioning, and windshield wipers, will expand its operations in the Guanajuato Puerto Interior plant located in Silao. The company plans to invest an additional $13 million and create 450 new jobs, making it one of the largest employers in the state with over 2,200 employees.

TOYOTA

The Japanese brand will invest $328 million in its Guanajuato plant toproduce a new generation of Tacoma vehicles for the North American market. The new version will be an Electric Hybrid, contributing to the company’s manufacturing electrification strategy and significant carbon emissions reduction in Mexico.

HONDA

Honda, the Japanese automaker, continues to expand its plant in Celaya, Guanajuato, reaching a total investment of $1.583 billion. Since its arrival in 2011 with an initial investment of $800 million and the commitment to create 3,200 jobs, Honda has continued to invest in the Celaya plant, now totaling 4,600 jobs generated, according to the governor of the state.

KLOECKNER METALS

The American steel and metal products manufacturer has invested $40 million in its new production center located in the O’Donnell Industrial Park in El Marques, Queretaro. The plant spans over 7,800 square meters and is expected to em ploy 200 workers once the project is fully established.

REMOTE WORK IN MEXICO: NEW EMPLOYER’S OBLIGATIONS

The new Mexican regulation for safety and health conditions when teleworking has been published in the official gazette. This new labor standard, known as NOM-037, will become effective six months after its publication, that is December 2023 will be fully applicable.

In order to be in compliance employers will now be required to approve the safety and health conditions of the specific workstation that any teleworker uses when working remotely. The employer has the obligation to protect the worker from any risk even if the workplace is outside the company’s premises.

To approve the remote workstation a new checklist should be used to verify the safety and health conditions, including ventilation, illumination, and noise among other factors. Pictures, videos, or even a domiciliary visit may be required to approve the telework area.

Right to privacy and intimacy, work-life balance, and other provisions must be taken into consideration when setting the telework rules and verification.

President

ALVARO GARCIA HR, Vice